Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively influence its earnings for the second quarter. The parent company, Alphabet, is expected to announce its quarterly earnings on Tuesday following the market close.
In light of this optimism, Bank of America analysts, Justin Post and Nitin Bansal, have revised their revenue forecasts for Google. They believe the integration of the Gemini AI platform into Google Cloud and the introduction of AI Overviews in Google Search will enhance sales.
In a recent research note, the analysts expressed confidence in the expanding role of AI across Google’s ecosystem, asserting that a broader implementation of AI overviews could lead to increased activity in its core Search business. This comes despite some challenges during the initial rollout of AI overviews, which had garnered negative attention online for producing errors. Consequently, they have raised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% growth in profits for the first quarter, partly attributed to its AI developments, resulting in a significant rise in its stock price and boosting its market capitalization past $2 trillion, placing it among other tech giants like Apple, Microsoft, and Nvidia.
The company’s strong performance was supported by a series of AI product launches as part of its Gemini AI initiatives. Notably, at the recent Google I/O developer conference, Google showcased a future AI assistant designed to interact visually and conversationally through smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Although Wedbush’s Dan Ives expressed cautious optimism regarding AI Overviews, he acknowledged their potential to enhance Search monetization in the long run. He also noted that AI is already contributing positively to Google Cloud, and like many of his Wall Street counterparts, he predicts a 27% surge in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth also expressed a favorable outlook, identifying Google alongside Uber and Amazon as a premier tech investment. He highlighted the encouraging developments in Generative AI prior to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is promising, it remains uncertain whether AI will sustain long-term sales growth for the company.